Arab Revolutions - a Black Swan Event

Sun, 02/27/2011 - 08:10 EDT

The world is abuzz yet again - the Arab protests turned revolutions spread like a wildfire across Northern Africa. Yet what's most surprising about those events is the general failure of anticipate and analyse them.

Post-factum a number of explanations have been offered, from the spread of Twitter culture and the Internet, economic downturn or just historical bubble of injustice and discontent waiting to burst. Many of those theories hold true, but what's surprising is how badly mainstream analysts failed to anticipate and to adequately analyse the processes in the region.

In this respect at least the world was as much, if not much more unprepared as it was when the berlin wall fell and a system that the West has been battling with mixed success for 50 years simply disintegrated.

The Middle East is one of the most researched and politically and economically vested regions on the world. There are numerous governments, NGOs and corporations researching it for their own ends. Yet it seems that most of them failed to anticipate what could be the biggest event in the region for the past 65 years.

In this sense, the Arab revolutions are a classic example of the Black Swan theory. Researched by Nassim Taleb - Black Swan events are characterised as:

The event is a surprise (to the observer).

The event has a major impact.

After its first recording, the event is rationalized by hindsight, as if it could have been expected (e.g., the relevant data were available but not accounted for).

So if I were an economic or political researched I'd seriously consider some book shopping right now.

Related

Submitted by Charles Hugh-Smith via OfTwoMinds blog, Given the presumed 17% expansion of the global economy since 2009, the tiny increases in production could not possibly flood the world in oil unless demand has cratered.

We have proof: everybody on Wall Street has read Nassim Taleb's book "The Black Swan." The CBOE's SKEW Index has hit an all-time high, which means the cost of protecting against a major outside event — what you might call a "Black Swan" or a "tail event" — is now at a record.

Submitted by Steve Hass of TheDiplomat.com Why Wasn’t There A Chinese Spring? It has now been two years since the self-immolation of the Tunisian street vendor, Mohamed Bouazizi, provided the spark that set the Arab world aflame. A wave of protests spread throughout the region in quick succession and led to the overthrow of long ruling autocrats in Egypt, Tunisia, Yemen, Libya, and possibly Syria.

There is a lot of froth in the media opinionating on Brexit vote. And there is a lot of nonsense.One clearly cannot deal with all of it, so I am going to occasionally dip into the topic with some comments. These are not systemic in any way.Let's take the myth of Brexit being a 'Black Swan'. This goes along the lines: lack of UK and European leaders' preparedness to the Brexit referendum outcome can be explained by the nature of the outcome being a 'Black Swan' event.

Yesterday on CNBC, Mark Spitznagel, chief investment officer for fund manager Universa Investments L.P., made a scary prediction. He warned that the S&P 500 could lose 40% of its value in the next couple of years. He went on to point out several facts and figures that led to this prediction. He specifically said, "there is a 20% chance of a well-over 40% correction in the S&P 500 within the next few years." CNBC even had viewers voting on this black swan event. So will the S&P 500 drop down to 760?